Uncorroborated Statement Recorded During Survey Cannot Form Sole Basis for Tax Addition

1. Core Facts & Background

• A survey operation was conducted at the business premises of the assessee by tax authorities.
• During the survey proceedings, the assessee surrendered an amount of Rs. 1.50 crore towards unexplained expenses.
• In the subsequently filed return of income, the assessee declared and accounted for an income of only Rs. 1.00 crore.
• The assessee subsequently retracted the admission made during the survey, citing that it was given under immense stress.

2. Revenue / Department’s Action

• The assessing officer issued a notice requiring the assessee to explain the shortfall between the surrendered sum and the returned income.
• Revenue rejected the retraction, maintaining that book discrepancies had prompted the initial surrender.
• An addition of Rs. 50 lakh was made to the assessee’s income representing the unoffered surrender balance.
• The first appellate authority confirmed an addition of Rs. 20 lakh while granting partial relief of Rs. 30 lakh to the assessee.

3. Assessee’s Defense & Arguments

• The assessee argued that the surrender statement was recorded under severe stress and was unsupported by the audited records.
• The assessee submitted that Revenue failed to bring on record any independent incriminating material to justify the addition.
• Reliance was placed on administrative circulars instructing assessing officers to rely on tangible evidence rather than confessional statements.
• The assessee demonstrated that apparent discrepancies arose from examining only one of multiple cash books and that an impounded diary bore no link to business accounts.

4. Final Ruling & Outcome

• The appellate tribunal held that a bald statement recorded during a survey cannot independently form the basis for making a tax addition.
• The tribunal noted that tax authorities failed to demonstrate any substantial discrepancy between the books and the declared return of income.
• The sustained addition was completely deleted, granting full relief in favor of the assessee.